Creditors of SurfStitch face $15m loss as administrators reveal retailer’s stock held hostage

Creditors of Australian surf retailer SurfStitch are facing huge losses of $15m, as administrators reveal the company’s stock has been locked up by its landlord.

Creditors of Australian surf retailer SurfStitch are staring down massive losses of $15m. Picture: SurfStitch

Creditors of Australian surf retailer SurfStitch are staring down massive losses of $15m, with stock of the now collapsed company being held hostage by its landlord.

It comes after revelations sportswear giant Nike Australia, which sold sneakers and clothes on SurfStitch’s website, had launched legal action against the online retailer, claiming it was owed over $230,000.

SurfStitch, which was sold by its parent company Alquemie Group to an unknown buyer in May, placed itself into voluntary administration last month, weeks after the legal proceedings were initiated.

The company’s website has been shut down for several weeks, displaying a message that states it is “currently undergoing maintenance”.

SurfStitch collapsed with around $15m in estimated creditor claims, administrators Edwin Narayan and Domenic Calabretta of Mackay Goodwin have disclosed.

Mr Narayan said the assets of the business, which mainly consisted of stock, were being held ransom by the landlord at SurfStitch’s former premises.

The company’s website has been shut down for several weeks. Picture: SurfStitch

“The premises was repossessed by the landlord prior to the appointment (of administrators),” minutes from a creditors’ meeting lodged with the corporate regulator read.

“The administrators understood that the landlord intends on claiming a lien over those assets.

“Further investigations (will) be conducted into the stock held, and valuation of the stock.”

Mr Narayan said the only other asset he was aware of was intellectual property.

Chinese manufacturer Jinjiang Shengyi Fashion Weaving Co. was listed as being owed $71,849, alongside software company Marketplacer ($37,031) and the Australian Tax Office ($228,761).

SurfStitch’s former owner Alquemie Group was listed as a creditor owed ($821,150) as well as General Pants Co – which is owned by Alquemie – owed $5,285.

Omnia Brands, which is understood to be owned by parent company ACTA Capital Management – a boutique private-equity firm founded by Richard Facioni, who also owns Alquemie – is owed $8.1m.

Creditors inquired as to why the company had been sold prior to the administration.

“The chairperson advised that at this stage he had not received all the relevant documentation, and could not comment on the sale,” the minutes read.

Creditors inquired as to why the company had been sold prior to the administration. Picture: SurfStitch

“This however would be investigated in the administration.”

Mr Narayan said at this stage the administrations were not aware of any outstanding employee entitlements.

It has not yet been confirmed if SurfStitch will put forward a deal to creditors, known as a deed of company arrangement, in an attempt to save the business.

Nike Australia is pursuing a winding-up order against the brand, claiming it is owed a total of $237,760, according to court documents filed with the Supreme Court of Victoria.

Winding up notices are usually issued by creditors of a company in order to enforce the payment of a debt.

If the debt is found legitimate and a company is unable to pay, the business is usually placed into liquidation by the court.

Even though SurfStitch has been placed into administration, the court can still order the business into liquidation.

The fresh legal action and administration mark another unexpected chapter in the SurfStitch saga, with the company previously collapsing in 2018.

It was previously reported that SurfStitch appointed administrators in 2017, with the retailer sold to Alceon Retail Bidco a year later – which is now known as Alquemie Retail Operations, a subsidiary of Alquemie Group.

Originally published as Creditors of SurfStitch face $15m loss as administrators reveal retailer’s stock held hostage